Medicare information can come with a lot of unfamiliar language. Understanding a few common terms can make it easier to compare coverage and anticipate costs.
Premium
A premium is the amount you pay regularly to have coverage, usually each month.
For example, most people pay a monthly premium for Medicare Part B. Depending on your choices, you may also pay a premium for a Medicare Advantage plan, prescription drug plan, or Medicare Supplement policy.
Deductible
A deductible is the amount you pay for certain covered services before your coverage begins paying its share.
For example, if a plan has a $200 deductible for a type of service, you may need to pay the first $200 of covered costs before the plan begins sharing those costs. Actual deductibles and rules depend on the coverage.
Copayment
A copayment, or copay, is a fixed amount you pay for a covered service.
For example, a plan might require a $30 copay for a specialist visit. The amount varies by plan and service.
Coinsurance
Coinsurance is a percentage of the cost of a covered service that you pay.
For example, if your coinsurance is 20% of a Medicare-approved amount of $100, your share would generally be $20 after any applicable deductible.
Out-of-pocket maximum
An out-of-pocket maximum is a limit on what you pay for certain covered services during a plan year. Medicare Advantage plans have a limit for covered Part A and Part B services. Premiums and some other expenses do not count toward that limit.
Original Medicare does not have an annual out-of-pocket maximum for Part A and Part B services.
Understanding these terms can help you look beyond the monthly premium and compare the full cost of coverage.
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